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Justice Dept. Approves XM Merger With Sirius

WASHINGTON — The Justice Department gave approval on Monday to the merger of two rival radio networks, XM and Sirius, a marriage that would create a de facto monopoly in satellite services now used by more than 17 million subscribers.

The proposed $5 billion merger, which was announced more than a year ago, must still be approved by the Federal Communications Commission. The merger is opposed by consumer groups and broadcasters who say it will force up prices and reduce the programming now available from the two competing systems.

The Justice Department’s antitrust division announced Monday that it approved the merger after determining that prices were not likely to rise, in part because of competition from other program sources, like HD Radio as well as iPods and other MP3 players that can be connected to home or car audio systems. The deal, the agency said, was unlikely to hurt competition or consumers.

“In several important segments of their business, with or without the merger, the parties simply do not compete today and therefore the merger would not be eliminating any competition between them,” Thomas O. Barnett, assistant attorney general, said in announcing the decision.

A merger would bring together programming by Oprah Winfrey, Willie Nelson and Snoop Dogg, who have lucrative and exclusive contracts with XM, with offerings on Sirius, including Howard Stern, Martha Stewart and National Public Radio.

XM, which has about nine million subscribers, offers play-by-play from Major League Baseball games. Sirius, which has about 8.3 million subscribers, broadcasts live play-by-play games of the N.F.L. and N.B.A., as well as live Nascar races.

F.C.C. officials have offered conflicting signs on whether the commission would approve the merger.

The commission’s chairman, Kevin J. Martin, was quoted last week as saying that “I haven’t figured out what I think we should do on it yet.”

Mr. Martin is thought to support an important element of the deal — the creation of a so-called à la carte system of pricing, which would allow customers to choose among packages of programs instead of the full lineup that subscribers must now purchase.

The Justice Department’s announcement was welcomed in a joint statement by XM and Sirius, which said a merger would lead to “lower prices and increased programming choices.”

The department’s decision was seen as a special victory for the deal’s chief architect, Mel Karmazin, the longtime entertainment executive who runs Sirius and would lead the combined company.

Mr. Karmazin had recently complained about how long it was taking for the Justice Department to approve a merger that both XM and Sirius had described as crucial to their financial stability, if not their survival.

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“The Bush administration has apparently never seen a telecommunications merger it didn’t like,” said Representative Edward J. Markey, Democrat of Massachusetts who leads the House Energy subcommittee on telecommunications. Senator Herb Kohl, Democrat of Wisconsin and chairman of an important antitrust subcommittee, said the deal would “create a satellite radio monopoly.”

Gene Kimmelman, a spokesman for Consumers Union, the nonprofit organization that publishes Consumer Reports magazine, criticized the decision. “If this is what our competition cops do,” he said, “we might as well close shop and save taxpayers a few hundred million dollars because they’re not doing their jobs.”

In a news conference, Mr. Barnett, who leads the Justice Department’s antitrust division, insisted that the department did not view the merger as creating a monopoly. He said that radio listeners had many other choices for programming, and that the alternatives would only grow.

“Some people may view iPods as a particularly good alternative,” he said. “They may view HD radio as an alternative.” He said that much of the programming now available on XM and Sirius might soon be available through wireless broadband connections on the Internet or cellphones.

He said the review showed that, because XM and Sirius equipment was not compatible, subscribers rarely shifted from one system to the other in their homes or cars; a switch could be expensive and time-consuming.

“Historically, once you choose one or the other of the audio services, you’re not going to switch,” he said. “A price switch is not going to cause you to jump to the other services.”

He also said that many subscribers obtain satellite radio service when they buy a car, further limiting competition since most major carmakers have long-term exclusive contracts with XM or Sirius.

Shares of both companies rose on the approval. Shares of XM rose $1.85, to $13.79. Sirius rose 25 cents, to $3.15 a share.

Correction: March 26, 2008

An article on Tuesday about the Justice Department’s approval of a merger of XM Satellite Radio and Sirius Radio referred incorrectly to a competing radio technology. It is called HD Radio, not high-definition radio. The “HD” is simply part of a brand name.

A version of this article appears in print on , on Page C1 of the New York edition with the headline: Justice Dept. Approves XM Merger With Sirius. Order Reprints|Today's Paper|Subscribe